Denver-based Video Advertising Startup Altitude Digital Raises $7M

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Altitude Digital announced this week it has secured a $7 million credit facility from Silicon Valley Bank. The Denver-based startup will use the money to double its headcount as it tries to increase the number of digital publishers using its ad sales software.

Altitude Digital develops programmatic advertising software that digital publishers use to automate the process of selling display, video, and mobile ads to advertisers through real-time auctions. Chief Marketing Officer Joe Grover said the company works with 1,800 publishers, including Bloomberg, Zynga, CBS Local, and the Star Tribune Company, which operates newspapers in Minnesota.

Programmatic advertising and real-time bidding are hot parts of the online advertising industry right now, especially for companies that specialize in enabling online publishers to sell video ads.

Altitude Digital has benefited, posting 364 percent year-over-year growth in the second quarter, Grover said. That was driven by the company’s video advertising software, which was released last year, he added. While Grover didn’t discuss recent revenue, the company said last summer it generated annual revenue of $28 million per year.

Altitude Digital also is profitable and has accomplished this with a relatively small amount raised from VCs.

But the market’s growth also means there are competitors, including startups that recently were bought by major tech or media companies and have vast resources behind them.

Last week, SpotXchange, which also is based in Colorado, sold a 65 percent ownership stake to Europe’s RTL Group for $144 million. Facebook and AOL also have entered the fray, with Facebook buying LiveRail for a reported $500 million and AOL buying Adap.TV for $405 million.

Like those companies, Altitude Digital offers a “supply side programmatic platform” that lets publishers solicit bids in real time for advertising space. The software helps ad buyers and agencies find the best audience for the brands they represent while publishers get the best price.

Grover said his company also offers unique tools like software that’s able to quickly detect and fix problems in delivering and playing ads.

While there are overlapping products and some competition, Altitude Digital thinks demand for programmatic advertising services is growing fast enough and the market will ultimately be big enough for an independent startup like itself to carve out a profitable business.

It also helps that publishers seem to prefer working with multiple companies and that the software works together. Adap.TV, LiveRail, and SpotXchange are all listed as partners on Altitude Digital’s website.

“There are some similarities between these companies and their technologies, but in today’s environment we have not only learned to co-exist but to cooperate to better meet the needs of the publishers,” Grover said. “In an environment where there are few exclusive relationships with publishers, you best serve the publisher when you can work with a variety of partners to improve publishers’ performance.”

In a crowded landscape, Altitude Digital looks to be holding its own. Each of the past two years Altitude Digital has made the Inc. Magazine 5000 list of fastest growing companies, earning the 54th spot both years. It told Inc. it took in $11.4 million in 2012, up from $217,000 in 2009. Altitude Digital had 21 employees when it submitted its report.

Those figures were out of date nearly as fast as they were published last August. Altitude Digital told MediaJobs.com it generates $28 million in revenue per year.

Since then, Altitude Digital’s staff has grown to 60 people, and the company plans to add another 40 by the end of the year, Grover said.

Altitude Digital’s growth has come with a fairly small amount of outside investment. The company raised $5 million from Salt Lake City-based Mercato Partners in 2012, but otherwise has relied on its sales and a loan to finance the company.

It’s worked pretty well.

“We’ve been able to maintain profitability and double the size of our company over the last three years, and that really opens up a lot of options,” Grover said.

That included selling equity to a VC firm or obtaining credit. Management felt the latter was a better fit.

“We decided we needed a little bit of growth capital to help with both working capital and expanding our platform, and this had a lower cost of capital and was a more flexible arrangement to fuel that growth,” Grover said. “We raised the $7 million now and will use that for the next few quarters, but we’ll reevaluate that moving forward.”

Of course, there are other benefits to using credit, such as not diluting prior investors or ceding control of the company.

“It maximizes the opportunities for us to run the company and grow the company the way we see fit,” Grover said.